5G STOCK Opportunities from CHINA 🇨🇳
Good day for our portfolio with Concho Resources earnings appealing to Wall Street. $CXO is up by about 8% today. Our two stocks listed on the London Stock Exchange, $DGE.L and $POLY.L are both up by more than 1%. There are two stocks down by more than 2%: Parsley Energy $PE and GameStop $GME . GameStop is having a bad week. With the stock gaining more 35% in a month, this should not be surprising that there will be a correction sooner or later. I already took the opportunity to invest more in GameStop yesterday. As you know, this is a workout opportunity and I'm still looking for further gains in the coming months.
5G STOCK Opportunities from CHINA 🇨🇳
5G is going to be the next big thing and I already have two 5G stocks in my portfolio, Apple $AAPL and Skyworks Solutions $SWKS but there are better opportunities in China.
The average P/E ratio of Chinese stocks $CHINA50 is currently 9.8 compared to 21 in the US $SPX500 and 27 in India. Stocks are really cheap in China and it is time to take advantage of this according to Charlie Munger, right hand man of Warren Buffett and Vice Chairman of Berkshire Hathaway $BRK.B . Chinese stocks are cheap because of the trade war and the political unrest happening in Hong Kong(which is now officially in a recession). We should, therfreo, take the opportunity. Even Ray Dalio says that it is time to invest in China. Other countries are engineering the markets with monetary policies and are, therefore, risky. The worst thing that China is devaluating its currency $USDCNH . They are only doing that as a retaliation in the trade war. Over the long-term, China won't be devaluating their currency anymore since they are moving more towards a service-oriented economy.
Why I want to invest in 5G in China? China is leading in 5G. Companies also receive subsidies from the government which helps them grow. The problem, however, is that subsidies makes competition harder with US companies. That's why I will stay away from Chinese companies which have US competitors. What we are looking at are Chinese network operators.
China Mobile $CHL $0941.HK is the largest network operator in the World with 942 million subscribers. They have operations in China, Hong Kong, Thailand and Pakistan. The revenues of the company went down last year and it is something common with all Chinese carriers after the government abolished roaming charges. China Mobile has the highest profit margin at 16% among its competitors. Verizon $VZ has a profit margin of 22% but they are not competitors to China Mobile. The P/E ratio of China Mobile is 10 compared to 15 for Verizon and At&T $T .
China Telecom $0728.HK is the second largest operator in China. They also have operations in Macau. For many years, their business was mainly fixed-line telephones but now they are focusing more in mobile networks. The advantage they have over competitors is that they have the lowest P/B ratio but they are not growing that fast.
China Unicom $0762.HK is smaller but it is the one growing at the fastest rate. This is because it provides cheaper services but it has the lowest profit margin at 5%. It also has the highest P/E ratio at 19.
Among these three, I have a preference for China Mobile. They are much bigger and it is hard to compete with them. They are also the ones at the most attractive price. Right now, I don't want to invest in China Mobile. I need to look at other sectors first. I've looked at the Chinese auto industry recently and also gold miners. I want to have at least one Chinese stock in my portfolio but I want to analyse different sectors first before making an investment.
One important thing to note is that these companies are all partly owned by the state. I don't like this but it is less risky than in Japan and Europe where you can see central banks buying equity and corporate bonds. China is a socialist state and never claimed to be a democracy. Things are getting better in China. They regulations are improving. In Europe, things are only getting worst. China's economy is also growing at a fast rate despite the Trade War and soon it will be the largest economy in the world. There's a lot of opportunities to take in China.
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